Over the next 21 days we will be blogging on the topic of what should I be doing in my business. As I have stated for years, so many small business owners work so hard in their business they never take a step backward and get a view from 10K feet and work on their business. They are busy doing things right, but are they doing the right things.
I think the first decision is the decision to set aside a given period of time, even if is only one hour a week and step away from your business and make a list of your biggest concerns and your biggest success. So many time we get overwhelmed by what is not working that we can't see what is working. Next we need to take action.
Once you know what is working, let your team in on what they are doing well and affirm them every time you see them doing something well. Words of affirmation and small trinkets of appreciations such as thank you notes, gift cards and promotional gifts can have a longer lasting effect on productivity and success than a pay raise. Give it a try. Look at what you are doing right and affirm your team for adding to the success of your organization.
Tuesday, December 27, 2011
It’s the end of another year. Wow. After looking back for a while I can see it looks a lot different that what we thought it was going to look. So many things we planned for did not even happen and a whole bunch of stuff we did not think would happen, happened. Either way we survived. Some might even say we thrived. It was the most successful year we have ever had in business. I cannot point to one thing that Tom, Scott or I did that was the tipping point. It was years of small decision, failures and successes all coming together. Business as in life is not all about the one thing, it is a series of things. Maybe even a mindset or dare I say values, principles and practices.
I just finished the book Onward by Howard Schultz. He is the CEO of Starbuck. He wrote the book about his experiences at Starbuck leading them through the tough recession of 2008 and 2009. Below I copied down his insight about what he learned about himself and his company during these tough times. We all know what works during the good times, almost everything. But it is during the tough times that our principles, values and practices as business people are tested. I know I learned much during the last recession and I will never be the same. Our business was off 70% by the time it was over. We had to look at every part of our business and see how we could improve it or eliminate it. We learned much about ourselves. As Coach Wooden put it “adversity does not develop character, it reveals it”.
Read these words from Onward by Howard Schultz, page 309, and reflect on how you can use them to build your business and your brand.
Grow with discipline. Balance intuition with rigor. Innovate around the core. Don’t embrace the status quo. Find new ways to see. Never expect a silver bullet. Get your hands dirty. Listen with empathy and overcommunicate with transparency. Tell your story, refusing to let other define you. Use authentic experiences to inspire. Stick to your values, the are your foundation. Hold people accountable but give them the tools to succeed. Make the tough choices; it’s how you execute that counts. Be decisive in times of crisis. Be nimble. Find truth in trials and lessons in mistakes. Be responsible for what you see, hear and do. Believe
Tuesday, November 1, 2011
As a small business owner and business coach, I am busy and I mean real busy. I try to juggle two businesses, family, friends, ministry and more. There are never enough hours in everyday. Don’t get me wrong, I love it. I get meet so many people and everyday is a different adventure. Some days I sit back in the evening and reflect and think, I sure was busy but was I busy doing things right or busy doing the right things. I tend to loose focus from time to time and become reactive to my environment instead of proactive.
I have found that if I set some measurable goals that are in writing and keep them within view all the time, I deliver better results. With our tooling business, it is all about sales dollars and sales volume. The margins are set and do not change nor do our expenses. On the other hand, with our business coaching there are several revenue streams that compete for our attention with differing margins and investments of time and networking and this causes conflicts for us at times. I still keep track of daily progress associated with sales volume and expenses. If this is difficult as an owner, how do you think it is for your team? We have worked to develop some Keep Performance Indicators (KPI) for each team member and we review them regularly. They say you cant expect, what your don’t inspect. We track a lot of things but keep our eyes on only a few key indicators. Each day we begin with the end in mind. Our goal is to grow repeatable sales, profitably and long-term. We then tie our actions to our goals and measure the outcome. More sales calls over time results in better relationships and opportunities to serve. We know we can’t sell people any service or product they don’t need. As we get to know clients and understand their needs, we then can customize and adapt our products and service to meet these needs if the fit is right. The following is a list of items I gathered from a new book by Mark Thompson and Brian Tracy called Now … Build a Great Business. Pick three or four of these items and track your progress and watch your company grow in the areas that are strategic to you:
1) Sales of all products from all sources (your top line)
2) Other revenues of all kinds (nonsales activities)
3) Cost of goods sold (all inclusive)
4) Expenses (every cost of doing business)
5) Salaries and wages ( usually the biggest single expense)
6) Lead generation (number and cost per lead)
7) Conversion rate from lead generation
8) Cost of customer acquisition
9) Average size of a sale
10) Average gross profit per sale
11) Average gross profit margin as a percentage
12) Average net profit per sale for each product or service
13) Average cost per sale (specific total cost per product)
14) Average number of times a customer buys
15) lifetime value of a customer
16) sales per employee (average)
17) Sales per day, week, month, or even hour
18) Sale per specific product or service
19) Average size of up-sells or cross sales
20) Average number of referrals received
21) Average sales per square foot (retail)
22) ROI (return on money invested and working in the business)
23) ROE (return on owner’s equity in the business)
24) ROS (return on sales, or net profit from sales after all expenses
25) Amount of receivables and how long outstanding
26) Amount of payable and when due
27) Amount of money in the bank
28) Amount of money drawn down on credit lines
29) Amount of debt in total owed by the business
30) General trend of key numbers
31) Number of order for future fulfillment
32) Number and size of bed debts and past-due payments
33) Daily active users of your website, your services, your products.
Tuesday, October 4, 2011
After hosting Dave Ramsey's Entreleadrship Simulcast on Friday, I was asked the same question twice. What are the three most common errors you see small businesses make? Great question. The three most common I see in my office are all related to each other. First I see entrepreneurs mixing personal and business expenses. I will confess that in the early years I was guilty of the same thing. I would pay the car insurance bill out of the business account and fill up the car with the business credit or debit card. Commingling funds hides the true state of both your business budget and your household budget. Having separate budgets for both home and business are critical. How can you know how much profit you have at the end of a month if you cannot record all of your costs correctly? Likewise, how do you know how much it costs to run your home if you are hiding costs for items such as insurance, gas, utilities and more within your business. In fact, if you have an LLC or are incorporated, you could be compromising your personal veil of protection if the government deemed that you have used business fund to support your personal lifestyle.
This leads to the second huge error I see, not setting aside money for personal and business taxes. Please don't get me wrong, I don't like paying taxes and I don't want to pay more than I owe, but I do know that I must pay taxes on every dollar of income or profit that I take in. What I see happen every week is that people do not set asset at least 25% for quarterly taxes and use the money as if it were their own to support a lifestyle that is a little more than they can afford. Then when taxes come due, they have a huge number to come up with. Please just start the habit of opening up a separate account for taxes and set aside 25% each month. This will reduce your stress.
The last mistake is debt. The late Larry Burkett stated that 60% of all businesses become unprofitable once their interest rates reaches 15%/. Think about it, most business are considered a success if they have a 5% to 10% profit margin after taxes at the end of the year. Now add an additional ten to fifteen percent debt burden and the company is now operating to pay debt payments. We win and loose sales and contracts by just pennies on the dollar. If your company has to carry a large debt burden it may not be in the position to successfully and profitably gain the next order.
This is just what I have seen from my side of the desk and as the owner of two small businesses and business coach. Remember, we are not just in the business to make money but also to keep some and enjoy it.
Tuesday, August 23, 2011
As independent business people we literally have to make thousands of decisions a month. Most of the time, since the responsibility for the outcome of those decisions rests on us, we usually make the decisions our selves. Wisdom tells us, that there is wisdom in the counsel of many. Let me ask you a question, where do you turn for advice for you business? In the past I did it alone. I did not burden my wife or my business friends with my issues or problems or even my successes. I have learned that the more information I can share with my wife, the better she can help me process my situation. Since at the end of the day, most of the decisions that are made, she get to live with the results and with me (good mood or bad mood). I have learned that many times she has an intuitive insight that I don’t see many times. We have joked that every time I don’t listen to her insight it costs us money.
I have also learned to develop a working group of other business leaders that have gotten to know me and something about my business. I have asked this group to hold me accountable to goals and standard we have all developed together. This has helped to keep me humble and not believe what the market is saying about my business during both great times and down times. As a person of faith I also look to the Bible for wisdom concerning decisions I make both at home and at work. For me the Bible gives me great insight into whom really in running “my” business. I have made it a habit to read one Proverb a day, everyday of the year. You would be amazed at the wisdom the writers of the Bible had for today’s business situations. If you would like help in developing your advisory board contact us at www.lighthouse-coaching.com and set up a free 45 minute consultation.
Friday, August 19, 2011
The more you make the more you spend.
In the past 28 years I have sold millions and millions of dollars of products and services. I have been on compensation programs that included base salary plus a small commission to the 100% commission and everything in between. If you are like me, the more I tend to make the more I tend to spend. The $200 weekends at home can turn into $5,000 family ski trips to Colorado. The one mistake I made early in my business and I see in my office every week is that people take too much money out of their small businesses. Small business owners tend to ratchet up their take home pay as business increases or they keep taking the same take home pay when the business is hit with decreases in sales and profits such as what many of us just experienced during the last two years.
My question to you would be, how would you feel as a small business owner if you had three to six months of business expenses set aside? There is no doubt that I am a big Dave Ramsey junkie, but when I changed the business models for both of our companies to include a percentage of income to be set aside for retained earnings, my stress level decreased 50%. I say 50% because I still work in the real world and things are changing all the time with end users, principles, distributors and clients. I now have a sense of peace that we will be OK if there is another downturn in the economy or if something goes wrong with one of the company cars or if we are fired by a client. There is no doubt it will hurt but having a fully funded retained earnings account gives me the security to take my time to make a good sound financial decision for the company instead of a move of desperation driven my the fear of failure.
The hardest part about establishing a retained earnings account is the habit of spending every dollar that comes in the door on your business or yourself. There is always something that you may need or want for the business and we all can do the math and justify the expense. As we all know, most of it is tax deductible and we can write it off (touchy topic for another blogg). We need to emotionally embrace the benefit of having the reserved funds account and start to set aside a percentage of each months profits for the account. You don’t have to do it all at once but think about building it up to three months expenses over a year to 18 months. The peace of mind and the reduced stress is an awesome experience. The stress we live under running small businesses is tremendous and anything we can do to eliminate it can extend our lives and the life of our small business. Set a goal and make this a part of your business model.
Monday, August 15, 2011
It the book of Proverbs is says"the wise see trouble and take refuge, but the fool proceeds and are punished". In my office I get to see it all. So many times the solution was easy a few weeks or a few years ago and there was little or not cost other than the change in habits or direction.
In Larry Burkett's book Business by the Book, he states that 60% of all businesses become unprofitable once their interest rate reaches 15%. Debt is surely a slippery slope that some business owners manage but there are other key areas that we also need to make sure we have a plan to address. We see so many people who are so busy working in their business they never get to work on their business.
We have compiled what we call the deadly dozen to motivate you to work on your business. This list of 12 question are for small business owners who want to take refuge and change their direction. If you can not answer yes to most of these questions, what are you going to do when something happens like a death of a partner or something to your physical health. If you need assistance coming up with a plan and then help implementing your plan, stop in and see us or give us a call at 330-808-3905 or visit our web site at
www.lighthouse-coaching.com. Don't wait till it is too late. Take control of your future before someone else does.
Small Business quiz
Answer yes or no to each of the following questions
1) My business has a monthly written budget we use as a guide?
2) We have written job descriptions for each employee and job?
3) We have partner/lose of key man insurance to cover us in the case of the death of a key team member or myself?
4) We have checks and balances in place to protect our assets against an employee or accounting service from embezzling or stealing from us?
5) We have a board of “advisors” you can turn to for wise counsel?
6) We have a plan to become debt free and stay debt free?
7) We have a plan for setting aside money for quarterly taxes ?
8) We have a plan to develop or do you have six months of expense in retained earnings?
9) We have a plan or strategy for succession planning?
10) We have short and long term disability insurance?
11) We have a program in place to develop our future leaders?
12) We are pleased with the lifestyle we are currently living?
What question would you add to our list?
What question keeps you awake at night?